Project A and B both have positive NPVs.If A and B are mutually exclusive,others thing held constant,which project will management accept?
A)Management will accept the project with the lower NPV.
B)Management will accept the project with the higher NPV.
C)Management will accept both A and B since they both have positive NPVs.
D)When projects are mutually exclusive, the NPV rule is ignored and neither project is accepted.

Question

Quizplus · Accepted Answer

Management will always choose the project with the higher NPV as it indicates the project will generate more wealth for the company. Mutually exclusive projects mean that only one project can be chosen, and in this case, the project with the higher NPV takes priority over the project with the lower NPV.

Project a and B Both Have Positive NPVs